5 THINGS YOU MUST KNOW ABOUT RECENT MORTGAGE LOAN CHANGES
1. Increased Ability To Finance Your Closing Costs You can now finance up to 100% of your closing costs thanks to recent changes in Federal Housing Administration (FHA) guidelines, compared to the old limit of 57%. This is very good news for the first time homebuyer who typically has less cash available at the time of closing.
2. Increased FHA Limits The FHA loan amount maximums have increased, which isparticularly helpful for people living in high cost housing markets. FHA's mortgage limit is now tied to local housing costs. The limit is now 95% of the median home price, or 75% of the Fannie Mae maximum loan amount, which ever is lower. This is another avenue for the first time home buyer to achieve the dream of home ownership.
3. Increased Accessibility to Down Payment Assistance Programs With the rapid increase in home prices over recent years, more and more people are having the dream of home ownership ripped from their hands. Typically one had to go through a rigorous process to qualify for a down payment assistance program. Today, there are now programs that have very little hassle. Ask your mortgage broker if they have access to such options.
4. Rapid Loan Approval One of the latest innovations in the mortgage industry is the advent of computerized loan approval. These programs provide both rapid loan approval and more uniform loan approval practices. This type of approval is done by scoring a borrower's credit worthiness, which quantifies the risk they will default on the loan. Does your mortgage broker use such a program?
5. Affordable Mortgages Which Don't Verify Income These loans are perfect for those people who are self employed, real estate investors, retired persons and anyone who doesn't want to have to prove their income. It is essential to have a good credit score in order to qualify for a non-income verified loan.
HOW TO STOP PAYING RENT AND OWN YOUR OWN HOME
Don't pay another cent in rent to your landlord!
It's a dream we all have - to own our own home and stop paying rent. But if you're like most renters, you feel trapped within the walls of a house or apartment that doesn't feel like yours. How could it when you're not even permitted to bang in a nail or two without a hassle? You feel like you're stuck in the renter's rut with no way of rising up out of it and owning your own home.
Well, don't feel trapped anymore! It doesn't matter how long you've been renting, or how insurmountable your financial situation may seem. The truth is, there are some little known facts that can help you get over the hump, and transfer your status from renter to homeowner. With this information, you will begin to see how you really can: - save for a downpayment - stop lining your landlord's pockets, and - stop wasting thousands of dollars on rent.
6 LITTLE KNOWN FACTS THAT CAN HELP YOU BUY YOUR FIRST HOME
The problem that most renters face isn't your ability to meet a monthly payment. Goodness knows you must meet this monthly obligation every 30 days already. The problem is accumulating enough capital to make a downpayment on something more permanent.
But saving for this lump sum doesn't have to be as difficult as you might think. Consider the following 6 important points:
1. You can buy a home with much less down than you think. There are some local or federal government programs (such as 1st time buyer programs) to help people get into the housing market. You can qualify as a first time buyer even if your spouse has owned a home before as long as your name was not registered. Ensure your real estate agent is informed and knowledgeable in this important area and can offer programs to help you with your options.
2. You may be able to get your lender to help you with your down payment and closing costs. Even if you do not have enough cash for a down-payment, if you are debt-free, and own an asset free and clear (such as a car, for example), your lending institution may be able to lend you the downpayment for your home by securing it against this asset.
3. You may be able to find a seller to help you buy and finance your home. Some sellers may be willing to hold a second mortgage for you as a "seller take-back." In this case, the seller becomes your lending institution. Instead of paying this seller a lump-sum full amount for his or her home, you would pay monthly mortgage installments.
4. You may be able to create a cash down payment without actually going into debt. By borrowing money for certain investments to a specified level, you may be able to generate a significant tax refund for yourself that you can use as a downpayment. While the money borrowed for these investments is technically a loan, the monthly amount paid can be small, and the money invested in both home and investment will be yours in the end.
5. You can buy a home even if you have problems with your credit rating. If you can come up with more than the minimum down-payment, or can secure the loan with other equity, many lending institutions will consider you for a mortgage. Alternatively, a seller take-back mortgage could also help you in this situation.
6. You can, and should, get pre-approved for a home loan before you go looking for a home. Pre-approval is easy, and can give you complete peace-of-mind when shopping for your home. Mortgage experts can obtain written pre-approval for you at no cost and no obligation, and it can all be done quite easily over-the-phone. More than just a verbal approval from your lending institution, a written pre-approval is as good as money in the bank. It entails a completed credit application, and a certificate that guarantees you a mortgage to the specified level when you find the home you're looking for.
Consider dealing only with a professional who specializes in mortgages. Enlisting their services can make the difference between obtaining a mortgage, and being stuck in the renter's rut forever. Typically there is no cost or obligation to enquire.
To sum up, there are many important issues you should be aware of that affect you as a renter. Why on earth would you continue to lose thousands by throwing it away on rent when with your agent you could take a few minutes to discuss your specific needs so that you can stop renting and start owning?
This conversation costs you nothing. And, of course, you shouldn't have to feel obligated to buy a home at the time you review this. But by taking the time to explore your options, and learn about the ways you can afford to buy a home, think how prepared and relaxed you'll be when you are ready to make this important step.
UNDERSTANDING THE PROCESS: MORTGAGE TERMS 101
80/20 Mortgage - A 100% financing program which uses a first mortgage to pay 80% of the purchase price and a second mortgage to pay the remaining 20%. This program require a good credit score. It can also eliminate the need for PMI (for PMI see below).
Appraisal - The assessment of a property's value by a licensed professional.
APR - The "Annual Percentage Rate" is the total cost of the loan expressed as a percentage per year. It takes into account closing costs and the note rate.
Back Ratio - The term for your total monthly debt.
ARM - "Adjustable Rate Mortgage". A mortgage loan that starts with a note rate lower than prevailing rates, but goes up at prescribed intervals with specified limits. Typically used to maximize pre-qualifying.
Balloon - A mortgage type that has a large, or "balloon" payment, due at the end of the loan to satisfy the total debt.
Closing - The process which finalizes the loan package and the sale of the property in the case of a purchase.
Conforming Mortgages - Loans which "conform" to Fannie Mae or Freddie Mac guidelines (for Fannie Mae and Freddie Mac see below).
Debt Ratio - The borrower's total debt compared to their total income, expressed as a percentage. The debt ratio is one criteria used to when qualifying for your mortgage loan.
DTI - "Debt to Income" is the total amount of debt a person has expressed as a percentage of their income. Also known as the "Back Ratio" (for Debt Ratio see above).
Down Payment - The portion of the property's purchase price that is paid for at closing.
Escrow Accounts - In order to get most lenders best note rate, it is usually necessary to pay 1/12th of both the property taxes and hazard insurance. These funds are put into an "Escrow Account" (or "Escrow"). The lender then pays the taxes and insurance at the appropriate times from this Escrow Account.
Down Payment - The portion of the properties purchase price which is paid for at closing.
Equity - The portion of a properties value that exceeds what you owe the lender, or the portion of the property you own.
Fannie Mae Federal National Mortgage Association (FNMA, a.k.a. FaNnie MAe), is a private, shareholder-owned company that works to assure that mortgage money is readily available for existing and potential homeowners in the United States. Fannie Mae does not directly lend money to homebuyers, but works with lenders to make sure that there is no shortage of funds available for mortgage loans. The method in which Fannie Mae accomplishes this is by purchasing mortgages from a variety of institutions that make up the primary mortgage market.
FHA - The "Federal Housing Authority" guarantees mortgage loans, making it easier for buyers to qualify. This is very useful for first time buyers, as they tend to benefit most from the qualifying criteria being relaxed.
FICO Scoring - The term for your credit score. Your credit score is a calculation derived from the timeliness of your payments, amount of available credit currently in use, number of credit inquiries, number of open accounts, history of bankruptcies, judgments and collections.
First Mortgage - A mortgage loan that has priority over all other financial interests in the property.
Fixed Rate Mortgage - A mortgage loan that has a note rate that is the same for the entire life of the loan. These are usually a person's best deal.
Freddie Mac Federal Home Loan Mortgage Corporation (FHLMC, a.k.a. Freddie MaC), is a shareholder-owned corporation that was established by Congress in 1970 to support home ownership and rental housing. Freddie Mac purchases single-family and multifamily residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage pass through securities and debt instruments in the capital markets. Freddie Mac guarantees these securities and mortgage lenders sell their loans to Freddie Mac and use the proceeds to fund new mortgages, which in turn increases the money supply to homebuyers. The Company does not make loans directly to homebuyers, but puts private investor capital to work for homebuyers in general.
HUD - The "Department of Housing and Urban Development" is an office of the Federal Government that helps make affordable housing more available. They also monitor and regulate the legal process of housing transactions.
Interest - The charge for using the lender's money.
Non-Conforming Mortgages - Loans which do not meet Fannie Mae or Freddie Mac guidelines (for Fannie Mae and Freddie Mac see above).
Note Rate - The actual interest rate charged by the lender on the principle of your loan.
LTV - "Loan to Value" is a ratio of the loan amount to the value of the property expressed as a percentage. It is the inverse of your equity.
PMI - "Private Mortgage Insurance" is insurance to protect the lender from financial loss in the event the lender defaults on the loan. You usually will pay this if you have less than 20% equity in the property. Rates vary with the risk of the loan. While you pay the premiums there is no benefit to the borrower.
Pre-Approval - A mortgage loan which is approved at a specified amount pending the satisfactory appraisal of the property.
Pre-Qualifying - The process of determining how much a person can potentially borrow based on income, credit score, liabilities and assets, prior to actually having chosen a property to purchase.
Principle - The unpaid balance of your mortgage loan.
Underwriting - The assessment of a loans risk which determines whether it gains approval.
VA Loans - "Veterans Administration" loans, which are available only to active and Honorably Discharged members of the military. These loans require little or no down payment, and they are insured by the Veterans Administration.
10 QUESTIONS YOU MUST ASK WHEN INTERVIEWING A MORTGAGE LENDER
Not all mortgage lenders are the same. If you decide to seek the help of a lender when buying a home or refinancing, you need some good information before you make any moves.
Picking a lender is one of those critical issues that can cost or save you thousands of dollars. There are very specific questions you should be asking to ensure that you get the best representation for your needs. Some lenders may prefer that you don't ask these questions, because the knowledge you'll gain from their honest answers will give you a very good idea about what outcome you can expect from using this lender. And let's face it - in real estate, as in life - not all things are created equal.
Hiring a mortgage lender is just like any hiring process - with you on the boss's side of the desk. It's critical that you make the right decision about who will handle what is probably the single largest financial investment you will ever make.
THE 10 QUESTIONS TO ASK
1. What Are the Interest Rate and Annual Percentage Rate of the Loan? Find out what the interest rate will be on the loan as well as the annual percentage rate (APR). The APR is a combination of the interest rate, points and other charges divided by the loans term to give an annualized rate. It is the best way to properly compare loan costs.
2. How Many Points Will Be Charged? A point is one percent of the loan amount. Points charged are additional to the interest rate that is charged on the loan. A loan with a low interest rate and high points may cost you thousands more than one with a higher interest rate but low points. This is important because the number of points charged varies from lender to lender.
3. What will be the Total Closing Cost Fees Charged? Lenders charge fees for the services incurred to process and close your mortgage. By law, closing costs must be disclosed within 3 days of the loan application, however, there are different approaches to calculating them. Some brokers will initially disclose closing cost figures that are very appealing, only to provide much higher costs as your closing date approaches.
4. Is There a Lock-In Policy? Is There an Additional Charge to Lock-In an Interest Rate and Discount Points? Many lenders offer a lock-in policy that guarantees you a certain interest rate and points for a specified number of days. The alternative to this is accepting the prevailing rate and points on your closing day. Since rates can change daily, the one time lock-in fee may be able to save you thousands.
5. How Long Does it Take to Process My Mortgage? Processing is the means by which your loan is prepared for underwriting, or approval. The time it takes to process a loan varies by the type of loan and even among lenders. Loans can usually be funded within 7 to 10 working days. If time is of the essence, a lender with quick processing, underwriting and funding capabilities can prove to be a very valuable asset.
6. Are You a VA Automatic or FHA Direct endorsement Lender? VA automatic and FHA direct endorsement means that a lender has met all the government requirements for FHA/VA and the lender's underwriter has completed mandatory education requirements. An automatic or direct endorsement lender can approve or disapprove a loan just as if the loan had been sent directly to the regional FHA or VA office.
7. Can I Finance the Upfront Private Mortgage Insurance (PMI) Premium into the Loan Amount? If your down payment is less than twenty percent of the sale price, to qualify, you will be charged PMI, an insurance premium to protect the lender in case you or someone else who assumes your loan defaults on the loan. Some lenders allow you to include the first years premium into the amount of the loan. Including this premium may be the difference when getting a mortgage by reducing your cash outlay.
8. Is There a Pre-Payment Penalty? Normally you can prepay a loan without penalty if you notify the lender in writing that you are either selling or refinancing. There are however, exceptions. Make sure to ask about your mortgage, and have it configured for your unique situation.
9. What is the Lenders Track Record? It's important to rate your lenders reputation for speedy processing, knowledgeable loan service and meeting contract deadlines. You want to hire a mortgage broker who will treat you the way you want to be treated and has respect for your purchase. Your lender will be dealing with your hard earned money and home purchase, so you want to be confident that you have made the correct decisions.
10. What Do You Offer to the First Time Buyer? (If applicable) Purchasing a home is among the most significant financial commitments most people will ever make. First time buyers often have special needs and concerns. If this is you, make sure your mortgage broker provides services especially tailored for the first time buyer.
Evaluate each agents responses to these 10 questions carefully and objectively. Who will do the best job for you? These questions will help you decide.
THE CREDIT REPORT: 9 THINGS YOU MUST KNOW TO GET APPROVED
1. Know Your Credit Score Your credit score is an essential component of having your loan approved. It determines the loan programs for which you are potentially qualified. The higher your credit score the better. Be sure to ask your Mortgage Lender for details.
2. Always Pay Your Bills on Time This is not intended to insult your common sense, but to emphasize how vital on time payments are to your credit score. Late payments can dramatically alter the rate, terms and even whether your mortgage loan is approved. Not making payments in a timely manner will almost always decreases your credit score.
3. Avoid Collections Have you ever disputed a bill before? Most of us have. Industry Leaders know that it’s almost always better to pay a disputed bill while continuing to work on the issue, than to have a collection filed against you. This can also lead to a reduced credit score.
4. Limit Your Liabilities Loans are approved largely on the percentage of your income used to pay off debt and other financial liabilities. You can get approved for a larger mortgage and therefore a more expensive home if you have lower credit card, automobile, student loan and other debt payments. Signing and/or co-signing for someone else’s purchase or loan can also increase you liabilities.
5. Limit Your Credit Inquiries Another of the factors used to calculate your credit score is the number of times potential creditors request your report. Too many of these inquiries can lower your credit score.
6. Do Not Open New Accounts in the Months Preceding Your Home Purchase Opening new accounts requires the pulling of credit reports, as noted above, this can dramatically reduce your credit score.
7. Do Not Close Unused Accounts Until The Purchase Has Finalized The portion of your available credit currently being used helps calculate your credit score. The lower the ratio the better. Closing accounts will increase the overall percentage. However, as discussed, opening new accounts to reduce your ratio is unlikely to help you.
8. Don’t Try To Hide Your Past Financial Difficulties One of the important services that a good mortgage broker offers is helping you overcome past financial difficulties that may hinder your ability to have your loan approved. Your mortgage broker should be on your side. Supply the information that helps them provide you with the best possible rate, terms and minimizes the impact these issues can present.
9. Provide Information That Has Recently Changed Not every creditor reports to the credit bureau monthly. Providing up to date information can increase your qualifying ability and decrease your rate.
HOW TO SAVE THOUSANDS OF DOLLARS WHEN YOU BUY A HOME
If you’re like most homebuyers, you have two primary considerations in mind when you start looking for a home. First, you want to find a home that perfectly meets your needs and desires, and secondly, you want to purchase this home for the lowest possible price.
When you analyze those successful homebuyers who have been able to purchase the home they want for thousands of dollars below a seller’s asking price, some common denominators emerge. Although your agent's negotiating skills are important, there are three additional key factors that must come into play long before you ever submit an offer.
THESE STEPS WILL HELP YOU SAVE THOUSANDS WHEN YOU BUY A HOME
1. Make sure you know what you want. As simple as this sounds, many homebuyers don't have a firm idea in their heads before they go out searching for a home. In fact, when you go shopping for a place to live, there are actually two homes competing for your attention: the one that meets your needs, and the one that fulfills your desires. Obviously, your goal is to find one home that does both. But in the real world, this situation doesn't always occur.
When you're looking at homes, you'll find that you fall in love with one or another home for entirely different reasons. Is it better to buy the 4-bedroom home with room for your family to grow, or the one with the big eat-in kitchen that romances you with thoughts of big weekend family brunches? What's more important: a big backyard, or proximity to your child's school? Far too often people buy a home for the wrong reasons, and then regret their decision when the home doesn't meet their needs.
2. Don't shop with stars in your eyes: satisfy your needs first. If you're lucky, you'll find a home that does this and also fulfills your desires. The important thing is to understand the difference before you get caught up in the excitement of looking.
3. Find out if your agent offers a "Buyer Profile System" or "House-hunting Service". These services take the guesswork out of finding just the right home that matches your needs. This type of program will cross-match your criteria with ALL available homes on the market and supply you with printed information on an on-going basis. A program like this helps homeowners take off their rose-colored glasses and affordably move into the home of their dreams.
To help you develop your homebuying strategy, use this form:
What do I absolutely NEED in my next home: 1. ______________________________ 2. ______________________________ 3. ______________________________ 4. ______________________________ 5. ______________________________
What would I absolutely LOVE in my next home: 1. _______________________________ 2. _______________________________ 3. _______________________________ 4. _______________________________ 5. _______________________________
How Sellers Set Their Asking Price
For you to understand how much to offer for a home you’re interested in, it’s important for you to know how sellers price their homes. We've presented this information before from the seller's point of view, but it makes sense to repeat it here to help you understand what motivates the price sellers ask for. Here are 4 common strategies you’ll start to recognize when you begin to view homes:
1. Clearly Overpriced. Every seller wants to realize the most amount of money they can for their home, and real estate agents know this. If more than one agent is competing for your listing, an easy way to win the battle is to overinflate the value of your home. This is done far too often, with many homes that are priced 10-20% over their true market value.
This is not in the seller's best interest, because in most cases the market won't be fooled. As a result, the home could languish on the market for months. This creates problems for the seller in that: * the home is likely to be labeled as a "troubled" house by other agents, leading to a lower than fair market price when an offer is finally made * the sellers have been greatly inconvenienced with having to constantly have their home in "showing" condition... for nothing. These homes often expire off the market, forcing sellers to go through the listing process all over again.
Be wary of homes that have been on the market for a long time. This occurs most often because the seller's asking price is too high.
2. Somewhat Overpriced. About 3/4 of the homes on the market are 5-10% overpriced. These homes will also sit on the market longer than they should. There is usually one of two factors at play here: either the seller believes that their home is really worth this much despite what the market has indicated (after all, there's a lot of emotion caught up in this issue), OR they've left some room for negotiating.
3. Priced Correctly at Market Value. Some sellers understand that real estate is part of the capitalistic system of supply and demand and will carefully and realistically price their homes based on a thorough analysis of other homes on the market. These competitively priced homes usually sell within a reasonable time-frame and very close to the asking price.
4. Priced Below the Fair Market Value. Some sellers are motivated by a quick sale. These homes attract multiple offers and sell fast - usually in a few days - at, or above, the asking price.
Discuss these sales strategies with your agent. Together, you'll be able to use this information to help you structure an offer that will motivate the seller and potentially save you a lot of money.
5 CRITICAL QUESTIONS TO ASK YOURSELF WHEN SELECTING A 15-YEAR FIXED MORTGAGE
1. How Much Will I Save on My Interest Rate? It is a fact that 15 year mortgages will provide you with a lower interest rate and overall lower interest payment. However, there is a trade off, be prepared for a larger monthly payment.
2. Should I Do A 30-Year Mortgage and Make Extra Payments? A 15-year mortgage locks you into a set payment. With a 30 year mortgage you can make extra payments which will decrease the number of years of mortgage payments, but you need self discipline to actually make the payments. You really have to look yourself in the mirror to answer this question.
3. What Is the Benefit of More Equity Sooner? The benefit of home equity is that it provides a ready source to borrow against. Often it makes sense to borrow against yourself (via your home equity).
4. How Long Do I Want To Have A Mortgage? Whether you are young or mature, you may want to eliminate this obligation sooner. You may, for example, want to time at the end of your mortgage to enjoy your retirement. Consider the benefits of earlier relief from this commitment, but don't forget to consider the income tax implications.
5. Should I Use My Home As A Primary Investment? By obliging in a 15-year mortgage you are investing in real estate, perhaps leaving less for other investments. Ask yourself, "How diversified do I want my portfolio to be" before making this financial commitment.
A 5-POINT PLAN: HOW TO GET CASH YOU NEED FAST!
1. A Traditional Refinance The initial option for most people to consider is a traditional refinance. This option takes advantage of available interest rates that might be lower than your current mortgage. The benefit of this option is that you can reduce your monthly payment while getting the best possible interest rate.
2. A Cash Out Refinance A cash out refinance works like a traditional refinance, except that you’re able to remove some of your equity in the property. One of the significant benefits of this option is your ability to pay off higher interest loans, make home improvements, or a major purchase, while at the same time qualifying your interest payments as a deduction on your federal tax return. Always consult with your accountant or tax attorney to determine eligibility in your unique situation.
3. A Second Mortgage This works very similarly to a Cash Out, except you get a second financing vehicle instead of refinancing an existing one. A few reasons for a second mortgage are debt consolidation, home improvements, or a major purchase. If you take cash out to buy a car you may be able to deduct the interest from your taxes, similarly to the last example. Remember to always consult with your accountant or tax attorney to determine eligibility in your unique situation.
4. Beware of the Quality of Service Provided You want your refinance to be the least amount of hassle in the shortest period of time. Ask your mortgage broker details of their service plan and performance guarantee.
5. Not All Mortgage Brokers are Created Equally Be sure to ask your mortgage broker about available loan products, terms and rates. A subtle difference can save or cost you thousands.
HOW TO AVOID THE 7 BIGGEST MISTAKES REFINANCE SHOPPERS MAKE
1. Make Sure of Your New Interest Rate Make sure that you save enough to justify the process of refinancing. It is best to decrease your interest rate by at least .75% to 1%. For example, this will save you about $100.00 a month on a $150,000.00 mortgage.
2. Know Your Closing Costs Up Front By law, closing costs must be disclosed within 3 days of the loan application, however, there are different approaches to calculating them. Closing costs are initially estimated until the details of your specific loan are clear. It is wise to use a worst case scenario and be pleasantly surprised.
3. Be Sure You Fully Understand Your Reason(s) For Refinancing Some refinance simply to reduce their interest rate. You should be aware that simply reducing your interest rate is not always to your advantage, so make sure that the gains from your rate reduction more than cover the related fees. There are, however, other legitimate reasons to refinance that may not be related to interest rates. Some are debt consolidation, home improvements, or a major purchase. Some of these choices may offer other financial or personal advantages, such as taking cash out to buy a car. In this example, you may be able to deduct your interest payments on your tax return. Always consult an accountant or tax attorney before making these types of decisions.
4. Beware of “APR” Advertising “APR” stands for Annual Percentage Rate. Some mortgage brokers use “APR” teaser rates to get your attention, however, they may actually end up costing you more. Such rates are often derived by using a 30 year mortgage coupled with an accelerated payment plan. Most lenders allow you to select such a plan, if you chose. Know your actual interest rate that you will be paying when comparing mortgages.
5. Should I Consider an Adjustable Rate? Adjustable Rate Mortgages, or “ARMs,” can be very helpful in assisting people into the housing market. They can help minimize your monthly payment, however, in the long run they can cost you more money if additional refinancing occurs.
6. Beware of the Quality of Service Provided You want your refinance to be accomplished with as little hassle and in the shortest period of time. Ask your mortgage broker details of their service plan and performance guarantees.
7. Not All Mortgage Brokers are Created Equally Be sure to ask your mortgage broker about all their available loan products, terms and rates. A subtle difference can save or cost you thousands.
PRIVATE SALE: SELL YOUR OWN HOME
If you ask anyone who has ever tried to sell their home themselves they'll tell you that from the moment the "For Sale by Owner" sign goes up, the phone begins to ring. Unfortunately, many of those calls will not be from prospective buyers, but rather from real estate agents looking to obtain your listing. Obviously the idea of not having to pay a commission to a real estate agent is attractive to any homeseller. But because of all the issues involved in the process, selling a home on one's own can be challenging, as many homesellers will attest to.
The key is to be properly prepared. If you are not, your home could remain on the market longer than you expect because you are not attracting and getting offers from qualified buyers. This can be a point where many homeowners become frustrated and consider giving up their dream of selling their home themselves. However, there are sellers who accomplish selling their own homes, very well. You can be one of them.
This article has been specially prepared to help homesellers, such as yourself, understand the elements involved so you, on your own, can sell your home quickly and for the most amount of profit. To help you prepare, here are 10 inside tips that you should be aware of before you make the decision as to whether or not this is the right approach for you.
10 INSIDE TIPS FOR SELLING YOUR HOME YOURSELF
1. Price it Right. Correctly setting your asking price is critical. Setting your price too high can be as costly as setting it too low. Home prices are determined by fluctuations in the marketplace, not by your emotional attachment or by what you feel your home is worth. In order to establish a realistic price for your home, objectively compare the price, features and condition of all similar homes in both your neighborhood and other similar ones which have sold in recent months. It is also important for you to be familiar with the terms of each potential sale. Terms are often as important as price in today’s market. Carefully budget your selling costs and prepare a net proceeds sheet to calculate your best estimate of what you will take away from your home sale. Prospective buyers may also request this kind of analysis of buying costs.
2. Prepare Your Home for Sale. First impression is crucial. Make sure your home makes a positive statement by carefully inspecting all details and viewing it through the objective eyes of a buyer. Don’t gloss over needed repairs and fix-ups, as your prospective buyers won’t. Your job is to ensure that your home stands out favorably from the competition.
3. Prepare Yourself With All Necessary Legal Documentation. Not surprisingly, there are many important legal contracts and documents that you must assemble, complete and understand. A partial checklist of forms that you will require for prospective buyers and for legal documentation is as follows: * Seller Disclosure * Purchase Contract * Mortgage Payoff * Loan Application * Deposit Receipt * Property Profile Fact Sheet * Buyer’s Cost Sheet * Closing & Settlement * Personal Property Exclusion List * Property Survey / Plot Plan * Seller's Statement of Representation
4. Market Your Home Effectively. Beyond the sign you will put on your lawn, you should find effective ways to spread the word about your home. Local buyers can be reached through the newspaper, but this is only a small part of the market you are after. Be sure you include the many buyers who could already be working with a Realtor®. To locate them, target as many top agents as possible in your market to see if the criteria of their buyers matches that of your home's. Because out-of town buyers are also an important target, you should create a strategy to reach these people as well. Above all, you should be very service-minded and make it easy for pre-qualified buyers to view your home. Ensure there is always someone available to answer the phone, pick up messages promptly, and be ready to give qualified prospects a tour of your home as soon as possible.
5. Remain Objective During a Showing of Your Home. Keep emotion out of the sale of your home, and the best way to do this during a showing is to remain physically in the background. If a prospective buyer says something negative about your home, it is better to counter-balance this point of view by illustrating the positives rather than becoming defensive.
6. Pre-Qualify Your Prospects. Don’t waste your time entertaining buyers who could never afford your home. Research their financial steadiness with respect to job security, salary, debts, liabilities and credit standing.
7. Negotiate Effectively & Knowledgeably. There will be many details to resolve before a sale can be considered final: price, terms, inspections, possession date, buyer concerns and objections. Make sure you fully understand the contract you have drawn up so you can in turn explain details and ramifications to the buyer and make any amendments to the sale that are necessary. The contract you use should be thoroughly examined by your real estate attorney. Some real estate brokers may be willing to help you do this. While this is going on, manage the buyer’s interest in your home so that it doesn’t wane during negotiations.
8. Know Your Buyer. Your objective during negotiations is to control the pace and set the duration. Try to determine what your buyer’s motivation is. Does he or she need to move quickly? Do they have enough money to pay your asking price? Knowing this information will give you the advantage in the negotiation because you will know up front, what you will need to do in order to get what you want.
9. Don’t Move Out Before You Sell. Studies have shown that it is more difficult to sell a home that is vacant. It looks forlorn, forgotten, simply not appealing. It could even cost you money. If you move, you’re also telling buyers that you have a new home and are motivated to sell fast which can, of course, give them an advantage at the negotiating table.
10. Know Why You're Selling and Keep it to Yourself. The flip side of "understanding your buyer" is to "understand yourself". Your reasons for selling will affect everything from your list price to how much time and money you will invest in getting your home ready for sale. Your motivation will help you determine what is more important to you: the money you walk away with, the length of time your property is on the market, or both. Different goals will dictate different strategies. As someone who wants to sell without a real estate agent in an effort to save the commission, it is likely that money is one of your primary considerations, (see below). Whatever your reasons, however, it is very important to keep them to yourself so as not to place yourself at a disadvantage at the negotiation table. When asked, simply say your housing needs have changed.
How to Assess Your Net Gain
To analyze whether or not you will end up ahead by choosing to sell on your own, consider the fact that most buyers do use a real estate agent because it doesn’t cost them anything for this service (i.e. the seller pays the agent’s fee). Be cautious as buyers, investors and speculators who seek out For Sale by Owners are typically those in search of a bargain. The low-ball offers from these types of buyers will often net you much lower in the long run. What you will have to judge for yourself is the following: 1. Be as prepared as possible with your marketing, negotiations, evaluations, showings and all legalities. 2. Consider what it will cost you to effectively market your home and assemble all necessary materials from the "for sale" sign to any contracts? 3. What price will a buyer offer you as a For Sale by Owner minus the costs identified in point 2 above. Is this net price higher than the price an experienced agent could net for you minus his/her commission?
Private sale can be a rewarding and cost-effective way to sell your home. Just make sure you've done your homework!
9 BUYER TRAPS AND HOW TO AVOID THEM
No matter which way you look at it, buying a home is a major investment. But for many homebuyers, it can be an even more expensive process than it needs to be because many fall prey to at least a few of the many common and costly mistakes that trap them into either: * paying too much for the home they want, or * losing their dream home to another buyer or, * (worse) buying the wrong home for their needs.
A systemized approach to the homebuying process can help you steer clear of these common traps, allowing you to not only cut costs, but also secure the home that’s best for you.
This important article discusses the 9 most common and costly of these homebuyer traps, how to identify them, and what you can do to avoid them.
THE 9 BUYER TRAPS
1. Bidding Blind. What price should you offer when you bid on a home? Is the seller’s asking price too high, or does it represent a great deal? If you fail to research the market in order to understand what comparable homes are selling for, making your offer would be like bidding blind. Without this knowledge of market value, you could easily bid too much, or fail to make a competitive offer at all on an excellent value.
2. Buying the Wrong Home. What are you looking for in a home? A simple enough question, but the answer can be quite complex. More than one buyer has been swept up in the emotion and excitement of the buying process only to find themselves the owner of a home that is either too big or too small. Maybe they’re stuck with a longer than desired commute to work, or a dozen more fix-ups than they really want to deal with now that the excitement has died down. Take the time upfront to clearly define your wants and needs. Put it in writing and then use it as a yard stick with which to measure every home you look at.
3. Unclear Title. Make sure very early on in the negotiation that you will own your new home free and clear by having a title search completed. The last thing you want to discover when you’re in the backstretch of a transaction is that there are encumbrances on the property such as tax liens, undisclosed owners, easements, leases or the like.
4. Inaccurate Survey. As part of your offer to purchase, make sure you request an updated property survey that clearly marks your boundaries. If the survey is not current, you may find that there are structural changes that are not shown (e.g. additions to the house, a new swimming pool, a neighbor’s new fence which is extending a boundary line, etc.). Be very clear on these issues.
5. Undisclosed Fix-ups. Don’t expect every seller to own up to every physical detail that will need to be attended to. Both you and the seller are out to maximize your investment. Ensure that you conduct a thorough inspection of the home early in the process. Consider hiring an independent inspector to objectively view the home inside and out, and make the final contract contingent upon this inspector’s report. This inspector should be able to give you a report of any item that needs to be fixed with associated, approximate cost.
6. Not Getting Mortgage Pre-approval. Pre-approval is fast, easy and free. When you have a pre-approved mortgage, you can shop for your home with a greater sense of freedom and security, knowing that the money will be there when you find the home of your dreams.
7. Contract Misses. If a seller fails to comply to the letter of the contract by neglecting to attend to some repair issues, or changing the spirit of the agreement in some way, this could delay the final closing and settlement. Agree ahead of time on a dollar amount for an escrow fund to cover items that the seller fails to follow through on. Prepare a list of agreed issues, walk through them, and check them off one by one.
8. Hidden Costs. Make sure you identify and uncover all costs - large and small - far enough ahead of time. When a transaction closes, you will sometimes find fees for this or that sneaking through after the "sub"-total - fees such as loan disbursement charges, underwriting fees etc. Understand these in advance by having your lender project total charges for you in writing.
9. Rushing the Closing. Take your time during this critical part of the process, and insist on seeing all paperwork the day before you sign. Make sure this documentation perfectly reflects your understanding of the transaction, and that nothing has been added or subtracted. Is the interest rate right? Is everything covered? If you rush this process on the day of closing, you may run into a last minute snag that you can’t fix without compromising the terms of the deal, the financing, or even the sale itself.
One More Tip...
Find out if your agent offers a Buyer Profile System or "House-hunting Service," which takes the guesswork out of finding just the right home that matches your needs. This type of program will cross match your criteria with ALL available homes on the market and supply you with printed information on an on-going basis. A program like this can help you to affordably move into the home of your dreams.
HOW TO GET 100% FULL MARKET VALUE FOR YOUR HOME - GUARANTEED
Because your home may well be your largest asset, selling it is probably one of the most important decisions you will make in your life.
In order to sell your home successfully in today's highly competitive market, this article explains how you can sell your home for full market value, providing it is priced correctly and marketed effectively.
MOST IMPORTANT - MAKE SURE YOUR HOME IS PRICED CORRECTLY
While many agents may promise to sell your home for the money you want, the reality of the real estate market today is that this simply doesn't always happen. The fact of the matter is, the majority of homes sell for a price that falls short of what sellers may have been lead to believe.
There are two factors at play here. On the one hand, you need to be beware of agents who set the list price on homes at unrealistically high levels simply to get listings. This is really unfair because it can set homeowners up for disappointment and failure.
On the other hand, you have homes that are priced correctly, but are marketed ineffectively. Without a proper marketing program in place to ensure a home is exposed to the highest number of qualified buyers, many homesellers feel forced to accept a lower offer.
There's nothing worse to a homeseller than to have their home sit unsold for many months because of improper pricing and/or marketing techniques. Needless to say, either of these situations is highly frustrating to any homeseller. But more than that, it can be financially crushing if you're counting on the full proceeds of the sale of your home to fulfill some other obligation.
To prevent this scenario when selling your home, here are some points to consider before choosing the agent you want to represent you.
* Will they market your home effectively? A good agent knows the market and has information on past sales, current listings, a marketing plan, and will provide their background and references. Evaluate each candidate carefully on the basis of their experience and qualifications.
* Are they pricing your home correctly? Home prices are determined by the marketplace not by your emotional attachment or by what you feel your home is worth. You should work closely with an agent who will suggest establishing a realistic price for your home. They will help you to objectively compare the price, features and condition of all similar homes in both your neighborhood and other similar ones that have sold in recent months. It is also important to be familiar with the terms of each potential sale. Terms are often as important as price in today's market.
* Do they set themselves apart from the others by offering innovative marketing plans to sell your home fast and for top dollar? Will they set up an aggressive marketing program to ensure your home is exposed to hundreds of qualified buyers? How much money does this agent spend in advertising the homes s/he lists versus other agents. In what media do they advertise, (newspaper, magazine, TV. etc.) Do they use a 24-hour hotline, "For Sale" signs, lock boxes, a Tour of Homes program, and Talking House signs and transmitters? What does this agent know about the effectiveness of one medium over the other?
* Are they accountable to you? In other words when they promise to sell your home for the price you mutually agree upon, do they offer you a guarantee (in writing) that you will get this amount of money for your home?
YOUR HOME SOLD FOR 100% FULL MARKET VALUE - GUARANTEED
A new and innovative program that some agents offer actually guarantees, in writing, that you will receive 100% of the mutually agreed upon price for your home before you list.
HERE'S HOW IT WORKS: When you list your home with an agent offering the 100% Full Market Guarantee program here's what happens: 1. This agent will review the Full Market Value Guarantee program with you and explain the details. (See below for a sample of information that may be found in such a certificate.) 2. They will then ensure that an aggressive marketing program is put in place to ensure your home is exposed to hundreds of qualified buyers. 3. They will also review what is required on your part to have your home in "showcase" condition in order to maximize the showing of your home to prospective buyers. 4. No empty promises. These agents put their money where their mouths are, they are accountable to you. The guarantee is in writing. If your home sale does not net you the price promised, these agents will pay you the difference out of their own pockets.
A SAMPLE FULL MARKET VALUE GUARANTEE CERTIFICATE
This is to certify that, upon the successful sale of your property (your address here) by (name of agent) during the contract period specified below, if this property is not sold for a minimum price of (your agreed upon price here), (agent's name) will reduce his/her commission to make up the difference between a lower sale price and the price noted above up to a maximum of the agent's portion of the commission due to (agent's name) as a result of this sale subject to the terms conditions laid out in the agreement.
Such an agreement could also include the following conditions: * seller agrees to list property for (X) days with (agent's name). * the listed price is set within 2% of a mutually agreed market value price determined on the basis of market conditions and comparable homes. * the property is made available for showings during reasonable hours and maintained in "showcase" condition during these times. * the seller allows (agent's name) to execute a full, approved marketing strategy. * a successful sale of the stated property must occur before expiration of the listing agreement. * the seller understands that this is not a representation to purchase the above said property.
At the bottom of the certificate there should be a place for you and your agent to date and sign the agreement.
Make sure that you find an agent that offers you this type of guarantee, or contact someone that can help you find one.
HOW TO AVOID GETTING STUCK WITH TWO HOMES:
The Real Estate Catch 22
We’ve all heard the old saying about being caught between a rock and a hard place. Well, unfortunately, that’s where most homeowners find themselves when they decide to move from one home to another.
You see, if you buy before selling, you could run the risk of owning two homes. Or, just as bad, if you sell first, you could end up homeless. That’s what is known as the Real Estate Catch 22, and for thousands of homeowners, it’s an extremely stressful position they find themselves in.
This financial and emotional tightrope is one many homeowners feel they have to walk alone. However, you should seek out agents offering specialized programs that can eliminate the stress and worry associated with selling and buying another home.
THE DILEMMA
The biggest dilemma when considering purchasing another home is deciding whether to buy first or sell first. Either way is risky because you could end up owning two homes or no home at all. Let's face it, the real estate market has become a tough environment for buyers and sellers alike. The fact is that it's more difficult to get homes sold today and therefore it's essential that real estate agents look for new and innovative ways to meet the demands of the market.
THE SOLUTION
A new and innovative program that some agents offer actually guarantees the sale of your home and takes away all of the worry and stress associated with selling and buying another home.
HERE'S HOW IT WORKS: 1. Your agent will prepare a total market analysis including a computerized printout of all comparable home sales and listings in your area. 2. With this information you and your agent can determine a market value for your home. 3. This establishes your guaranteed price and list price which you will receive up front (in writing) before your home is marketed. 4. You are doubly protected because you know that your home will sell for the guaranteed price. However if you receive an offer from an outside buyer for more than the guarantee price you get the higher offer. 5. You can confidently look for your next home and immediately place a firm cash offer (not a conditional one) when you find a home you like because you know the minimum that your home will sell for and when you can expect to receive the money from it's sale.
This service eliminates the emotional roller coaster ride of whether to buy first or sell first so you can avoid the risk of getting stuck with two homes or no home at all.
One More Thing...
Remember, not all agents are alike and you should consider only those that can offer you the most innovative marketing plan available to ensure that your needs are completely and properly met.
HOW TO GET YOUR MORTGAGE LOAN CLOSED ON TIME, GUARANTEED
Do they set themselves apart from the others by offering innovative marketing plans to close your loan On Time, at the best possible rate and with no hassles?
Will they aggressively search for the best mortgage loan for your situation? What programs do they offer borrowers with unique needs, such as first time buyers, high income with little or no savings or low down payments? It’s important to rate your lenders reputation for speedy processing, knowledgeable loan service and meeting contract deadlines.
Are they accountable to you?
In other words when they promise to get you a mortgage loan, do they offer you a guarantee (in writing) that you will get this amount of money on the date of closing of your transaction?
YOUR "100% ON TIME CLOSING" GUARANTEE A new and innovative program that some brokers offer actually guarantees, in writing, that you will receive 100% of the agreed upon amount of your loan on your closing date.
Here's How It Works! When you agree to a mortgage loan with a broker offering the 100% On Time Guarantee program here's what happens:
This broker will review the 100% On Time Guarantee program with you and explain the details. (See a sample of information below, that may be found in such a certificate.)
You will disclose the date of the closing and they will then ensure you have your funds for the closing.
They will also review what is required on your part to have your loan close on time.
No empty promises. These brokers put their money where their mouths are, they are accountable to you. The guarantee is in writing. If your loan does not on time as promised, these brokers will pay you the predefined amount out of their own pockets.
100% On Time Closing Guarantee Certificate This is to certify that, upon the unsuccessful closing of (your name here)'s loan by (name of broker) on the closing date specified below, (broker's name) will pay you (predefined amount here) in CASH.
Such an agreement could also include the following conditions: the predefined amount may be set to a percentage of the loan a successful sale of the stated property must occur on the date stated in this agreement
The borrower understands that this is not a personal guarantee of the funds
At the bottom of the certificate there should be a place for you and your agent to date and sign the agreement.
24-HOUR LOAN APPROVAL: 6 QUESTIONS
1. How Does It Work? It used to be that all mortgages were put through the long process of manual approval. Today there is a process of computerized approval that can be done very quickly. The benefit is not wondering for weeks whether your loan is approved. You are also able to close on your home more quickly and with less hassle.
2. Does Everyone Qualify? Everyone qualifies to go through the computerized process, but not every person will get approved. In some cases your loan will be “referred” to the manual underwriting process. Even in these cases it’s helpful, as it provides valuable insight.
3. What Is Required To Get Started? As soon as you have completed the application process your loan can proceed to the approval stage. An answer comes back as to whether the mortgage loan is approved or not. If your loan isn’t approved, your broker can work with you to make changes that may help you gain approval through the computerized process.
4. Are There Other Uses Of This Technology? Yes, there are! Probably the best example of these uses is the ability to get pre-approved for your home purchase in this same short time frame.
5. What Are The Benefits? One of the leading reasons that real estate transactions fail to close is that the mortgage loan runs into difficulty after the final loan commitment date. Learning about potential problems early allows more time to resolve them. Why risk your hard earned money and time finding the property? Use a mortgage broker who has this ability.
6. How Soon Will I Be Able To Close My Mortgage? If your mortgage loan is approved through this process, it is possible to close very quickly. Ask your mortgage broker to assess your unique situation and provide you with your specific timeline.
6 THINGS YOU MUST KNOW BEFORE YOU BUY
Mortgage Regulations Have Changed . . . Mortgage regulations have changed significantly over the last few years, making your options wider than ever. Subtle changes in the way you approach mortgage shopping, and even small differences in the way you structure your mortgage, can cost or save you literally thousands of dollars and years of expense.
Get the Right Information Whether you are about to buy your first home, or are planning to make a move to your next home, it is critical that you inform yourself about the factors involved.
Industry research has revealed that there are 6 common mistakes that most homebuyers make in mortgage shopping that can have a significant impact on the outcome of this critical negotiation. If handled correctly, these issues could result in a mortgage that will cost you less over a shorter period of time.
6 Things You Must Know Before Obtaining a Mortgage Before you commit your hard earned dollars to monthly mortgage payments, consider these 6 issues. Effective consideration of these important areas can make your payments work much harder for you.
1. You can, and should, get pre-approved for a mortgage before you go looking for a home. Pre-approval is easy, and can give you complete peace-of-mind when shopping for your home. Your local lending institution can provide you with written pre-approval for you at no cost and no obligation, and it can all be done quite easily over-the-phone. More than just a verbal approval from your lending institution, a written pre-approval is as good as money in the bank. It entails a completed credit application, and a certificate that guarantees you a mortgage to the specified level when you find the home you’re looking for.
2. Know what monthly dollar amount you feel comfortable committing to When you discuss mortgage pre-approval with your lending institution, find out what level you qualify for, but also pre-assess for yourself what monthly dollar amount you feel comfortable committing to. Your situation may give you a pre-approval amount that is higher (or lower) than the amount of money you would want to pay out each month. By working back and forth with your lending institution to determine what this monthly amount is, and what value of home this translates into at today’s rates, you won’t waste time looking at homes that are not in your price range.
3. You should be thinking about your long term goals, and expected situation, to determine the type of mortgage that will best suit your needs. There are a number of questions you should be asking yourself before you commit to a certain type of mortgage. How long do you think you will own this home? What direction are interest rates going in, and how quickly? Is your income expected to change (up or down) in the near term, impacting how much money you can afford to pay to your mortgage? The answers to these and other questions will help you determine the most appropriate mortgage you should be seeking.
4. Make sure you understand what prepayment privileges and payment frequency options are available to you More frequent payments (for example weekly or biweekly) can literally shave years off your mortgage. Simply by structuring your payments so that they come out more frequently, will significantly lessen the amount of interest that you will be charged over the term.
For the same reason, authorized pre-payment of a certain percentage of your mort-gage, or an increase in the amount you pay monthly, will have a major impact on the number of years you will have to pay and could shorten your payment term considerably.
These two payment options can cut years off your mortgage, and save you thousands of dollars in interest. However, not every mortgage has these prepayment privileges built in, so make sure you ask the proper questions.
5. Ask if your mortgage is both portable and/or assumable A portable mortgage, where available, is one that you can carry with you when you buy your next home and avoid paying any discharge penalties. This means that you will not have to go through the entire mort-gage process again unless you are making a move up to a much more expensive home.
An assumable mortgage is one that the buyer for your home can take over when you move to your next home. This can be a very powerful tool at the negotiating table making it much easier and more desirable for a buyer to buy your home, and again saves you any discharge penalties.
6.You should seriously consider dealing with a Mortgage Expert Consider dealing only with a professional who specializes in mortgages. Enlisting their services can make a significant difference in the cost and effectiveness of the mortgage you obtain. For example they can make the process faster thereby avoiding costly delays. Typically there is no cost or obligation to enquire.
HOW TO BUY A HOME WITH ZERO CASH
This special article has been prepared to outline what you need to know in order to take advantage of an innovative program which allows you to get into the housing market immediately, with zero downpayment.
You may have owned a home before and are presently renting, or are a first time homebuyer and need a way to break into the housing market but held back because you thought you required a substantial downpayment. Or you may be in the position where you do not want to liquidate your financial assets to use as a downpayment on a home. Regardless of your present situation, you want a way to get into or to re-enter the housing market without having to make a cash downpayment. The Zero Cash Downpayment Program may be just the answer you need.
PROGRAM QUALIFICATIONS
1. An excellent credit history. * no recent history of bad debts * consistent and timely payment of current liabilities.
2. Limited liabilities. You will be required to disclose all current liabilities you have in order to determine how much more debt you can carry. (i.e. present car loan, credit cards, etc.)
3. At least 3 years of employment stability. You will be required to show proof of employment for the past 3 years, i.e. a letter of employment from your employer or financial statements for the past 3 years if self-employed.
4. The financial ability to carry larger monthly payments. Without a downpayment you will be required to meet the obligation of larger mortgage payments. Your monthly payments could vary from a few to several hundred dollars more per month.
Under the terms of the program you can purchase many types of properties. They include: * detached or semi-detached homes * freehold townhomes * condominium townhomes
It is important to note that not all properties qualify for the Zero Cash Downpayment Program. To ensure that you get an accurate picture of what properties may or may not be included in this program in your particular area, it is advisable to review the terms of the program with your Realtor®.
BENEFITS OF THE PROGRAM
1. No Downpayment. If you are renting, why pay your landlord's mortgage? Why not reap the benefit of building your own equity? Are you renting because you are held back from owning your own home because you think you need a substantial downpayment?
The general perception of many would-be-homebuyers and even that of some Realtors® is that a substantial downpayment is required in order to purchase a home. This is simply not true. Because of this perception many would-be-home-buyers feel they have to save for years before they have enough money for a downpayment so that they can finally enter the housing market. In the meantime they are lining someone else's pockets, while waiting a long time before they can start building their own equity. With the Zero Cash Downpayment Program you don't need a downpayment to buy a home.
2. Buy a Home Now! If needing a downpayment is keeping you from owning your own home, this new program offers you an immediate way to get into the housing market. With the Zero Cash Downpayment Program you don't have to wait to purchase a home.
3. Approved Bank Program. It is important to know that the Zero Cash Downpayment Program is an approved bank program. Review this program with your lender or Realtor® who has specialized knowledge in financing and can assist you with the Zero Cash Downpayment Program.
5 DEADLY MISTAKES MOST INVESTMENT PROPERTY BUYERS MAKE
1. Not Making a Profit From Day One Make sure your interest rate will allow for a positive cash flow when you rent the property. While you will hopefully make equity over time, cash flow is often a make or break consideration.
2. Choose the Right Amount For Your Down Payment Twenty percent down used to be the necessary amount to get into an investment property, but today ten percent can be enough. Be aware that the down payment amount will usually influence your interest rate, and interest rate will determine your properties cash flow.
3. Not All Mortgage Brokers Are Created Equally Be sure to ask your mortgage broker about available loan products, terms and rates, and when comparing brokers, be sure you compare 'apples to apples'. A subtle difference could save or cost you thousands.
4. Your Real Estate Agent is Unlikely to Understand the Process and Unique Needs of an Investor Your mortgage broker and real estate agent need to work in concert for the best possible outcome. Only hire a real estate agent with investment property experience.
5. Not Understanding the Purpose of Your Investment Do you plan to “fix and flip”, rent, or sell the property to another investor? This is a big question in selecting the best mortgage product to meet your needs. Make sure you have considered this carefully and discussed all your options fully with your mortgage lender. Subtle differences in your loan could cost or save you thousands.
6 MISTAKES TO AVOID WHEN TRADING UP TO A LARGER HOME
Unlike the experience of buying a first home, when you’re looking to move up, and already own a home, there are certain factors that can complicate the situation. It’s very important for you to consider these issues before you list your home for sale.
Not only is there the issue of financing to consider, but you also have to sell your present home at exactly the right time in order to avoid either the financial burden of owning two homes or, just as bad, the dilemma of having no place to live during the gap between closings.
In this article, we outline the six most common mistakes homeowners make when moving to a larger home. Knowledge of these six mistakes, and the strategies to overcome them, will help you make informed choices before you put your existing home on the market.
1. Failing to get a pre-approved mortgage. Pre-approval is a very simple process that many homeowners fail to take advantage of. While it doesn't cost or obligate you to anything, pre-approval gives you a significant advantage when you put an offer on the home you want to purchase because you know exactly how much house you can afford, and you already have the green light from your lending institution. With a pre-approved mortgage, your offer will be viewed far more favorably by a seller - sometimes even if it's a little lower than another offer that's contingent on financing. Don't fail to take this important step. Speak to a Mortgage Broker FIRST !!!
2. Rose-colored glasses. Most of us dream of improving our lifestyle and moving to a larger home. The problem is that there's sometimes a discrepancy between our hearts and our bank accounts. You drive by a home that you fall in love with only to find that it's already sold or that it’s more than what you are willing to pay. Most homeowners get caught in this hit or miss strategy of house hunting when there's a much easier way of going about the process. For example, find out if your agent offers a Buyer Profile System or "House-hunting Service," which takes the guesswork away and helps to put you in the home of your dreams. This type of program will cross-match your criteria with ALL available homes on the market and supply you with printed information on an on-going basis. A program like this helps homeowners take off their rose-colored glasses and, affordably, move into the home of their dreams.
3. Failing to make necessary improvements. If you want to get the best price for the home you're selling, there will certainly be things you can do to enhance it in a prospective buyer's eyes. These fix-ups don't necessarily have to be expensive. But even if you do have to make a minor investment, it will often come back to you ten-fold in the price you are able to get when you sell. It's very important that these improvements be made before you put your home on the market.
If cash is tight, investigate an equity loan with your mortgage broker that you can repay on closing.
4. Not selling first. You should plan to sell before you buy. This way you will not find yourself at a disadvantage at the negotiating table, feeling pressured to accept an offer that is below-market value because you have to meet a purchase deadline. If you've already sold your home, you can buy your next one with no strings attached. If you do get a tempting offer on your home but haven't made significant headway on finding your next home, you might want to put in a contingency clause in the sale contract which gives you a reasonable time to find a home to buy. If the market is slow and you find your home is not selling as quickly as you anticipated, another option could be renting your home and putting it up on the market later - particularly if you are selling a smaller, starter home. You'll have to investigate the tax rules if you choose this latter option. Better still, find a way to eliminate this situation altogether by getting your agent to guarantee the sale of your present home (see point number 5 below).
5. Getting caught in the "Real Estate Catch 22". Your biggest dilemma when buying and selling is deciding which to do first. You don't want to end up with the terrible situation of owning two houses, or worse, owning none! Point number 3 above advises you to sell first, however there are ways to eliminate this dilemma altogether. Some agents offer a Guaranteed Sale "Trade-Up" Program that actually takes the problem away from you entirely by guaranteeing the sale of your present home before you take possession of your next one. If you find a home you wish to purchase and have not sold your current home yet, they will buy your home from you themselves so you can make your move free of stress and worry. (By the way, if you need help finding an agent who can give you details about this type of program, please contact us.)
6. Failing to coordinate closings. With two major transactions to coordinate -- together with all the people involved such as a real estate agent, appraisers, lawyers, loan officers, title company representatives, home inspectors or pest inspectors -- the chances of mix-ups and miscommunication increase dramatically. To avoid a logistical nightmare, ensure you work closely with your broker.
Keep these six points in mind when you start looking for a new home. They'll make your life easier, and could potentially save you a lot of money.